Removal is the procedure by which the defendant in a state court action moves the lawsuit from state court to federal district court. The defendant normally must remove within 30 days after being served with the summons and complaint (28 U.S.C. § 1446(b)(1)). However, when a case is removed late, or otherwise invalidly, lawyers may be personally sanctioned by the court.

In Mintz & Gold LLP v. Daibes, the court sanctioned a lawyer $10,000 for removing a case to federal court days after an adverse state court ruling made years into the state court litigation (No. 15 CIV. 1218 PAE, (S.D.N.Y. May 6, 2015)). Notably, the court determined that the removal by defense counsel was "patently" a ploy to subvert that adverse ruling.

The plaintiff, a law firm, sued its former client in New York state court to collect unpaid legal fees. The parties litigated extensively in state court, ultimately leading both sides to move for summary judgment. In February of this year, the Appellate Division, First Department, directed the lower court to enter summary judgment in the law firm's favor. Two days later, the defendant filed a notice of removal in federal district court.

Shortly thereafter, the plaintiff sent a letter to the district court judge arguing that the notice of removal was time-barred and frivolous. The plaintiff also reported it had served the defendant with a motion for Rule 11 sanctions in connection with the notice of removal under FRCP 11(c). After a pre-motion conference, the plaintiff filed motions for:

Regarding remand, the defendant argued that the 30-day deadline never began to run because service of the summons and complaint was defective. The defendant maintained that because he raised personal jurisdiction defenses in both a motion to dismiss and his answer in state court (although he did not contest service of process), he did not waive his inadequate service defense. The court disposed of that argument easily because in New York state court, a failure to specifically raise a jurisdictional defense in an answer or pre-answer motion to dismiss constitutes a submission to the court's jurisdiction and a waiver of the particular jurisdictional defense (see Practice Note, Motion to Dismiss in New York State Supreme Court: Motion, Opposition, and Possible Outcomes: Waiver of Certain Defenses). The court also noted that uniform case law holds that a defendant may not delay filing a notice of removal while seeing how he fares in state court.

Turning to the request costs and fees under the removal statute (28 U.S.C. § 1447(c)) and for Rule 11 sanctions, the court denied fees under the removal statute and granted Rule 11 sanctions against the defendant's attorney. Citing Kay v. Ehrler and Second Circuit case law, the court held the fee-shifting statute did not apply because the plaintiff appeared pro se and had not paid any out-of-pocket legal fees (499 U.S. 432, 435 (1991)).

Sanctions under Rule 11 were another matter. Under Second Circuit case law, sanctions are appropriate where it should have been patently obvious to any attorney who had familiarized himself with the law governing removal to federal court that removing the case was frivolous (Four Keys Leasing & Maint. Corp. v. Simithis, 849 F.2d 770, 773 (2d Cir. 1988)). The removal here was frivolous because it was undisputed that the defendant had been free to remove the case back in April 2011 when it received a complaint showing the availability of federal jurisdiction based on diversity of citizenship. And once the plaintiff explained to defense counsel why removal was frivolous in its letter under Rule 11(c) and citing case law, defense counsel had "no business" continuing to defend the removal.

Regarding the amount of sanctions, the court noted that the purpose of Rule 11 sanctions is to deter rather than to compensate, and if a monetary sanction is imposed it should ordinarily be paid into the court as a penalty. The court decided only to sanction defense counsel and not his client and arrived at a $10,000 sanction based on the court's judgment that this amount was sufficient, but no greater than necessary, to deter similar misconduct.

The rules governing removal can be complicated. To avoid the risk of legal fees and sanctions for wrongful removal, attorneys should familiarize themselves with removal procedures and the strict timelines involved. Practical Law has several resources to assist counsel in analyzing removal, including the following Practice Notes: